Americans Are Borrowing Again But Still Less Than Before Freeze

May 23, 2013

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BOISE, Idaho—When the economy nose-dived several years ago, Lou Aaron
found it impossible to get a bank loan, forcing him to use six different credit
cards to keep his 1950s-style drive-in restaurant running.

Now, the 50-year-old chef said banks are coming to him offering loans.
His sales are climbing, and he expects to borrow $350,000 to open a third
location next year where he will sell prime rib, hamburgers and his "Idaho
Ice Cream Potato" dessert.

America's credit crunch is easing. For the past six years, consumers and
businesses have struggled to borrow money, but slowly, things are getting
easier.

Large U.S. companies are taking advantage of low interest rates to borrow
record amounts of capital in bond markets. Banks are opening the spigots for
commercial and industrial firms, and loans grew at an 11% annualized rate in
the first quarter of this year, the sixth double-digit percentage increase in
seven quarters, Federal Reserve data show. According to the Fed's survey of
senior bank-lending officers released Monday, 28% of banks lowered the cost of
credit lines early this year to smaller firms like Mr. Aaron's that have annual
sales of less than $50 million. Residential lending began edging up last year,
and even people with bad credit can get a loan to buy a car these days.

In all, some $713 billion in credit flowed to U.S. households and
nonfinancial businesses last year, double 2011's $336 billion, according to the
Fed. That is still a fraction of the $2.2 trillion in credit that lifted
American consumers and businesses in 2007.